Better health and ageing for all Australians

National mental health report 2010

Indirect costs of mental illness

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The figures presented in the preceding sections only count the cost of providing specialist mental health services and do not reflect the full economic impact on the community and costs to government arising from mental illness in the Australian population.

Many people with a mental illness depend on government for assistance that extends beyond specialist mental health treatment. They require access to a complex array of community services including housing assistance, community and domiciliary care, income support and employment and training opportunities. The costs associated with all these services represent a major component of total government outlays that are attributable to mental illness.

Early National Mental Health Reports estimated 'indirect' costs to be significant and likely to outweigh the cost of providing specialised mental health care, but routinely collected information was not available to quantify the claims. Analysis of spending patterns by Commonwealth departments, completed in response to the 2005 Senate Inquiry into the Provision of Mental Health Services in Australia, represented an important step toward filling this gap. The analysis estimated the 2001-02 cost of providing income, housing, aged care, employment and other services for people with mental disorders to be in excess of $3 billion.18 Updates to these estimates prepared by the Department of Health and Ageing in collaboration with other Commonwealth departments estimated the total indirect costs for 2003-04 at $3.7 billion (table 5).

More up-to-date data are not available for the current report, although there are reasonable grounds to assume that the spending patterns have been maintained. When scaled to 2008 prices, the estimated Australian Government support costs rise to $4.4 billion, compared with a total of $5.14 billion spent by all governments on providing specialised mental health services (figure 19).

These estimates are conservative, using available information that allow reasonable attribution of costs to mental illness. Comparable information on state and territory government outlays is not available, further emphasising that this figure is likely to be a significant underestimate.

The analysis confirms that government outlays for mainstream support services accessed by people with mental illness approximate, and possibly exceed, the total funding allocated by all governments for specialist mental health services.

For the Australian Government, the implication is significant. For every dollar allocated to mental health services in the specialised sector, an additional $2.30 is spent on providing support services to people who require such assistance due to their mental illness. Income support payments through the Disability Support Pension (DSP) are the single largest outlay, accounting for an estimated $2.5 billion in 2007-08. Of the 732,000 individuals receiving the DSP in June 2008, 28% (approximately 202,000) had a psychiatric or psychological condition recorded as their primary condition. This group has been growing by an annual average of 5% since 2001, more than twice the overall DSP growth rate.
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In addition to outlays by government, mental illness impacts on the broader economy by reducing workforce participation and productivity. Mental illness creates barriers for many who would be capable of productive employment if appropriate treatment and employment assistance programs were available. Recent analysis by the Productivity Commission suggests that of six major health conditions (cancer, cardiovascular, major injury, mental disorder, diabetes, arthritis), mental illness is associated with the lowest likelihood of being in the labour force.19

Lost productivity arising from workforce non participation by people on disability pensions alone is estimated at $9.7 billion annually (Figure 20). Additionally, for those in the employed workforce, international and Australian studies consistently point to impaired employment functioning associated with untreated mental illness as a leading cause of lost productivity. Productivity losses are due to both abseentism, and reduced functioning while at work. Based on recent Australian and overseas evidence, the cost of reduced productivity associated with mental illness in the employed workforce is $5.9 billion annually.

Table 5: Estimated cost to the Australian Government of support services for people with mental illness, 2003-04 ($ Millions)

Table 5 is presented as a list in this HTML version for accessibility reasons.

Estimated cost to the Australian Government of support services for people with mental illness, 2003-04:
  • Income support payments - 3,219.8 million dollars
  • Workforce participation programs - 114.8 million dollars
  • Housing and accommodation programs - 115.6 million dollars
  • Disability support services - 45.5 million dollars
  • War veteran's disability compensation - 192.1 million dollars
  • Home and community care - 10.6 million dollars
  • Total - 3,698.4 million dollars

Source: Based on methodology used Australian Government submission to the 2005 Senate Inquiry into the Provision of Mental Health Services in Australia, updated by Department of Health and Ageing in collaboration with other Commonwealth departments. See footnote 18.

Figure 19: Comparing direct and estimated 'indirect' government costs of mental disorders – 2007-08 estimates ($million)


Refer to the following text for a text equivalent of Figure 19. Comparing direct and estimated 'indirect' government costs of mental disorders – 2007-08 estimates ($million)

Notes:
1. Estimate of 'Other Australian Government support costs' for 2007-08 is based 2003-04 data, converted to 2008 prices.
2. Information on state and territory 'other government support costs' is not available but known to be substantial. It includes contributions from a number of human services, including housing, disability support, juvenile justice, child protection, police and corrective services. These estimates are conservative, using available information that allow reasonable attribution of costs to mental illness. Comparable information on state and territory government outlays is not available, further emphasising that this figure is likely to be a significant underestimate.

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Text version of Figure 19

Direct and estimated 'indirect' government costs of mental disorders – 2007-08 estimates (current prices):
  • State and Territory mental health costs - 3,220 million dollars
  • Australian Government mental health-specific costs - 1,919 million dollars
  • Other Australian Government support costs (estimated) - 4,393 million dollars

Figure 20: Estimated cost of lost productivity per year due to mental illness, 2007-08 ($billion)


Refer to the following text for a text equivalent of Figure 20. Estimated cost of lost productivity per year due to mental illness, 2007-08 ($billion)

Notes:
1. Estimate of lost productivity attributable to DSP recipients is calculated on the assumption that the average recipient, if in employment, would attract 75% of the average national wage.
2. Source for lost productivity due to untreated illness in the employed workforce: Hilton MF, Scuffham PA, Vecchio N, Whiteford HA. Using the interaction of mental health symptoms and treatment status to estimate lost employee productivity. Aust N Z J Psychiatry, 2010, 44 (2):151-61.

Text version of Figure 20

Estimated cost of lost productivity per year due to mental illness, 2007-08:
  • Lost productivity through non participation in workforce (DSP only) - 9.69 billion dollars
  • Lost productivity due to untreated illness in those in workforce - 5.90 billion dollars

Footnotes

18 Australian Government (2005) The Contribution of the Australian Government to Mental Health in Australia. Submission to Senate Inquiry into the Provision of Mental Health Services in Australia.
19 Laplagne P, Glover M, Shomos A (2007) Effects of health and education on labour force participation. Staff Working Paper, Productivity Commission, Melbourne.

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